Pentagon officials juggle priorities, face spending shortfalls

By Amber Corrin

Mar 29, 2013

Although the recently passed continuing resolution provides the Defense Department with an additional $10 billion that has allowed it to lighten up on planned furloughs, there remain serious shortfalls in funding that defense officials worry pose a readiness crisis.

The CR's added spending helps offset some of the most pressing financial issues, and it reduces sequestration's blow to the Pentagon from $46 billion to roughly $41 billion, according to Defense Secretary Chuck Hagel.

Nonetheless, additional costs in overseas operations and a $22 billion shortfall for this fiscal year in operations and maintenance accounts mean that officials are scrambling to determine spending priorities.

"The biggest issue that we're going to be dealing with ... is the department's people and its mission, how these numbers are going to affect all that," Hagel said at a DOD press conference March 28. "How do we protect that? How do we implement that? We're going to be doing that with less. Where do we and how do we prioritize the threats and then the capabilities required to deal with threats? We'll continue to do everything possible."

Hagel, who recently directed Deputy Defense Secretary Ashton Carter and Joint Chiefs Chairman Gen. Martin Dempsey to conduct a comprehensive strategic review, admitted to uncertainties in what has become a strategic juggling act of financial and security priorities.

"This is an imperfect process," Hagel said. "Any decisions we make -- and we'll have to make some and will make some -- will be within the context of that imperfection, but we don't have any choices but to get through a very significant analysis...intensifying a review on everything."

Dempsey, also speaking at the press conference, said that the urgency of decision-making means the Pentagon must trade, to some degree, future readiness for sustained current operations.

"The uncomfortable truth is...on Monday, we'll be halfway through the fiscal year, and we'll be 80 percent spent in our operating funds," Dempsey said. "We don't yet have a satisfactory solution to that shortfall, and we're doing everything we can to stretch our readiness out."

The officials said some cuts are already being achieved by reducing training for non-deployed units and cutting back on base operating support, in addition to the furloughs. Although they have been able to reduce the number of furlough days from 22 to 14, which Hagel said will save DOD around $2.5 billion, there still is not enough flexibility to overcome serious concerns about military readiness.

"I want to make special mention of the word flexibility. To us, that just doesn't mean transfer authority and reprogramming," Dempsey said. "Those are necessary, but insufficient. I mean what I would describe as full flexibility. I'm talking about the unpopular, but unavoidable institutional reforms that will be necessary."

Among those unpopular reforms: cuts to facilities and equipment, as well as changes to acquisition processes and compensation structures, he said.

While both he and Hagel stressed that readiness will remain top priority, Dempsey said the current situation is both a period of readiness crisis and a period of adjustment.

"We're in the midst of trying to figure that out," Dempsey said. "This is not the deepest [contraction of defense budgets], but it is the steepest. This is the steepest decline in our budget ever."